76221 POLICY NOTE NO. 36 MARCH 2013 Africa Trade Policy Notes John Keyser Regional Trade of Food Staples and Crop Inputs in West Africa Rising prices for basic food products are back in the headlines and when HIGHLIGHTS food prices go up poor consumers in Africa, who spend the majority of their income on simple foodstuffs, suffer. Rising food prices are also having WEST AFRICA IS SIGNIFICANTLY BELOW ITS important macroeconomic impacts on many African countries since more POTENTIAL IN REGIONAL and more food is being imported from the global market leading to TRADE IN FOOD STPALES. … Locally grown maize, for worsening balances of trade. This issue is not going to go away. Demand for example, only accounted for 3% food in Africa is projected to double by 2020 with consumers increasingly of recorded ECOWAS imports located in rapidly growing cities. from 2005-2009. Fortunately, as the World Bank shows in its recent report, Africa Can Help REGIONAL TRADE OF SEED Feed Africa, the continent does have the means and opportunities to deliver AND FERTILIZER IS ALMOST improved food security to its citizens. If African farmers were to achieve the NON-EXISTENT IN WEST yields that farmers attain in other developing countries, the output of food AFRICA … staples would easily double or even triple thereby creating new income By harmonizing fertilizer blends opportunities for farmers and reducing Africa’s dependence on imports across countries and encouraging from the rest of the world. For this to happen, however, farmers need to be local blending capacity, West better linked to both inputs and to consumers. Often the nearest source of Africa could realize a savings of demand is a across a border yet fragmented regional markets and lack of at least USD 30-40 per ton. predictable trade policies deter much needed private investments – including small investments by poor farmers in raising productivity to large PETTY AND ORGANIZED CORRUPTION ADDS TO THE investments in input supply, seed multiplication, and food marketing. Given COST OF REGIONAL TRADE… that different seasons and rainfall patterns are not conveniently confined in Ghana, small traders say it within national borders, and that variability in production is expected to common practice to pay GHS increase with climate change, facilitating cross-border trade is more 4.00 to 5.00 per bag to avoid important than ever to provide farmers and traders the opportunities and inspection and paperwork incentives they need to supply Africa’s rapidly growing demand for staple requirements. commodities. This note looks at the regional trade situation for food staples and crop inputs in West Africa and types of barriers that need to be overcome for the WORLD BANK region to achieve its potential in food trade. 1| www.worldbank.org/afr/trade Despite having some of the lowest per hectare potential. Table 1, provides an overview of West yields in the world, many places with good growing Africa’s imports of selected commodities and shows conditions already produce food surpluses that are that most internationally traded foods originate not traded internationally due to various from outside the region. Locally grown maize, for constraints. Following an overview of current trade example, only accounted for 3% of recorded conditions, the note uses the example of Ghana to ECOWAS imports from 2005-2009 and probably show how only a modest reduction in trade costs no more than 10% of total imports including for fertilizer could have a significant (and informal transactions outside the legal system. sustainable) impact on rural incomes and Although many parts of West Africa are deficit in agriculture competitiveness. The final part of the maize, surpluses in high production zones that note then describes a few key areas where relatively could help meet the shortfall often go untraded clear-cut policy changes and institutional reforms because of high costs, fragmented markets, and could help set West Africa on a path to realizing its other trade barriers. In Table 1, a greater share of full potential in agriculture production and trade. total imports of millet and sorghum originate in other ECOWAS countries, but even for these Current Trade of Food Staples commodities, value chain experts say that large quantities go untraded because it is easier and Most regional food trade in West Africa currently cheaper for breweries, stock feed manufacturers, involves small consignments being traded in and other buyers who need a regular supply to informal value chains based on personal and/or import from outside the region. linguistic ties. These movements range from simple cross-border deals between extended family and tribe members to some very long distance Table 1: ECOWAS Imports of Basic Foods by transactions along traditional corridors that can Region (2005 to 2009) extend over thousands of kilometers and multiple Other ECOWAS Rest of World border posts. Precise figures are difficult to come Maize 3% 97% by, but in the Ashaiman market near Tema, Ghana, Millet 38% 62% for example, women traders say that a dozen or so Sorghum 21% 79% individuals travel to northern Togo once or twice Livestock 98% 2% Source: Compiled from Bromley, et. al. (2011). per month to buy 20-50 bags of cowpeas to sell in their market stalls and to other domestic traders. Regional experts likewise report that Burkina Faso Indicative of these limited trade connections, there exports some 20,000 to 40,000 tons of maize to are frequently large price differences from one Niger and Mali in most years with lesser volumes West African country to another. During the 2008 flowing into Benin, Ghana, and Togo depending food crisis, for example, prevailing market prices on annual supply and demand conditions. An for maize in the farm areas of southwestern established trade corridor for maize between Burkina Faso stood at only USD 280 per ton Techiman, Ghana and Niamey, Niger was also said against USD 640 to 750 per ton in major coastal to exist (1,100km across two borders) while cities from Accra to Lagos. Similarly, in 2010, considerable volumes of sorghum were reported to millet prices in Accra were around USD 660 per go all the way from Kano, Nigeria to Dakar, ton against USD 260 to 360 in the northern Senegal (3,600km across four borders). Onions and production zones of south-central Mail and tomatoes are also widely traded in regional markets. northern Burkina Faso. Although West Africa has some of the highest transport costs in the world, Despite the importance of these transactions, it is these large price differences cannot be explained by apparent the overall volume of regional food trade transport alone. in West Africa is low and significantly below its 2| www.worldbank.org/afr/trade With respect to livestock, Table 1 shows that a very have a direct bearing on the price that can be paid different situation prevails with 98% of imports to producers, and thus rural incomes and potential originating from other ECOWAS countries. In this for growth and poverty reduction. Unlike East and case, several thousand goats, sheep, and even cattle Southern Africa, there are few, if any, large-scale are shipped every day along traditional trade commodity brokers involved in regional trade of corridors from Sahelian countries to deficit zones food staples in West Africa, and few impersonal in coastal areas. Like grains, these transactions are institutions of the type needed for traditional mostly informal and involve high costs so lead to traders to switch from one corridor to another to low producer prices and high consumer prices that take advantage of new business opportunities. limit the potential for growth and poverty reduction. With more and more people in West The World Food Programme (WFP) is probably Africa living in large cities, policies to improve the the largest regional trader in West Africa and seeks efficiency of regional livestock markets also need to to procure a variety of staple foods for its relief be a high priority for the future. operations. In practice, however, WFP reports there are frequent problems obtaining the required In both the livestock and grain markets, most export permits, quality certificates, and other regional trade in West Africa relies on social, documents needed from different countries for linguistic, and even family bonds. Even very long- large transactions to succeed. Small traders mostly distance trade deals are typically based on oral avoid these requirements, but this is not possible contracting and, especially in the livestock sector, for large commercial traders including the WFP may involve credit sales so require strong who need to comply with all rules and regulations. interpersonal relations. In these deals, commodities Procurement of large quantities at a competitive often change hands five or six times between the price has also been a problem for WFP since this farm and retail level with each intermediary usually has to be done through government- incurring costs and needing to make a profit from controlled agencies. In 2010, for example, the the transaction. Re-bagging, for example, is typically Government of Ghana offered rice to WFP at done each time grain is sold since there are no USD 970/ton fob Tamale against the world market other guarantees for quality or even basic price of USD 550/ton cif Monrovia where the composition. Volumes are typically measured by supplies were needed. WFP is obliged to buy the number of bags or tins per bag rather than in regional grain when possible, but this very high kilos or metric tons. In physical terms, most traders offer was considered uncompetitive and the deal work in small lots that range in size from just a few was eventually stopped after exporting just 1,600 bags (300-400kg of grain) to perhaps one or two full tons of a 4,000-ton procurement. truckloads at most (say 60-80 tons). Regional Trade of Seed and Fertilizer While it is clear these trading systems are well adapted to local conditions and institutional realities With respect to crop inputs, regional trade of seed in West Africa, it is equally apparent that the lack and fertilizer is almost non-existent in West Africa. of more systematic and larger-scale trading options Under the ECOWAS Trade Liberalization imposes a high cost on the region. In an open Scheme (ETLS), Member States agreed to reduce economy, price is determined competitively and the barriers to regional trade of crop inputs, but in value flows upstream from the consumer to each practice governments still enforce national product producer and marketing agent in the chain. All registration and testing requirements that make costs and profit margins taken by processors, regional trade difficult and expensive. traders, and other value chain participants before In the case of seed, for example, the ECOWAS the product’s value reaches the farm level therefore Council of Ministers formally adopted a Regional 3| www.worldbank.org/afr/trade Agreement on Harmonized Seed Legislation in at least USD 30-40 per ton (USD 1.50 to 2.50 per May 2008 under which any variety of seed 50kg bag). Moreover, given that fertilizer registered in one ECOWAS country would be application rates in West Africa are among the eligible for production and commercial sale any lowest in the world, any savings in trade costs would other ECOWAS country without further likely contribute to much higher crop yields simply certification or testing. Almost five years later, as a result of more farmers being able to afford at however, the reality is very different whereby least some product even if it is not always the most regional governments still only recognize their own ideal type. According to the Ghana PPRSD, local test results. In Ghana, for example, the new Plants blends are designed to help farmers achieve and Fertilizer Act of 2010 specifically requires all maximum yields and the cost of preparing each varieties of seed to be tested domestically for a formulation is not considered when approving new minimum of three years regardless of whether the products. variety has been approved in another ECOWAS country. Seed companies pay the full cost of this Input subsidy programs in different countries service equal to a minimum of USD 3,500 per year further complicate the trade situation with much of for expression of interest and seed entry plus the the fertilizer that does go across regional borders full cost of all materials used in on-station and travelling illegally. In the current 2012/13 crop farmer field trials agreed with the Plant Protection season, for example, Ghana is subsidizing 176,000 and Regulatory Services Directorate (PPRSD). tons of fertilizer for non-cocoa crops at a cost of When asked about the ECOWAS Seed around USD 64million. In practice, however, even Agreement, staff at PPRSD explained there has the Ministry of Agriculture and Food acknowledges been “some discussion� of harmonized trade there have been problems with smuggling and, policies for seed but said these talks were at a very according to the Ghana News Agency, less than early stage. In effect, most countries do not yet have 25% of the 1,700 tons of fertilizer meant for small a Seed Act and, in Ghana, the Act of 2010 farmers in Kassena-Nankana District ended up in contradicts the 2008 ECOWAS Agreement. local soils with the rest smuggled to Burkina where it could be sold for two times the subsidized price. Similarly, although West African countries produce Bearing in mind that subsidies can have many very little fertilizer and must rely on extra-regional positive effects, these programs are inherently imports, opportunities for regional trade and expensive to run and carry an ever-present risk of distribution are constrained by a range of factors leakage so also give good reason to look for including country-specific product formulations and complementary and more sustainable ways of national testing and registration requirements. reducing prices such as improving the regional While different soils and crops naturally need trade environment. different amounts of nutrients for optimal growth, a recent study by the International Fertilizer Fertilizer Trade and Rural Incomes in Ghana Development Center (IFDC) and International To illustrate how efforts to reduce trade costs could Food Policy Research Institute (IFPRI) shows that have leveraged impact on agriculture product differentiation in West Africa has taken competitiveness and rural incomes, it is useful to place for non-technical reasons. As a result, stick with the example of Ghana where information different blends have to be custom made for each on the cost structure of fertilizer and farm country at a very small scale, which add production costs for the 2009/10 season is unnecessarily to production cost and price. By available. The point of this quick example is not to harmonizing fertilizer blends across countries and recommend specific alternatives to Ghana’s subsidy encouraging local blending capacity, the authors program, but to demonstrate how even a modest estimate that West Africa could realize a savings of reduction in trade costs could go a long way to 4| www.worldbank.org/afr/trade achieving many the same objectives as a subsidy structures, Fuentes, et al (2011), found that up to without being drain on the national budget. 50% of the commercial price of fertilizer is accounted for by market constraints and First, Table 2 shows the estimated build-up of bottlenecks. The 8.2% price reduction modeled fertilizer prices in Ghana under two trade scenarios. here is therefore a conservative estimate of the The base scenario reflects actual conditions that savings that could be realized from regional policies prevailed in the 2009/10 agriculture season in such as the introduction of harmonized fertilizer which the unsubsidized price of NPK fertilizer was blends, streamlining of import procedures, and around USD 39.00 per 50kg bag. The reduced cost savings on transport costs. Potential savings on scenario, on the other hand, reflects the type of finance charges and improved domestic marketing savings that could realistically be achieved through are not included in this analysis yet offer further various trade improvements. In a detailed study of potential for price reduction. the Ghana fertilizer market and underlying price Table 2: Build-up of Fertilizer Prices in Ghana under Alternative Trade Scenarios Base Scenario Hypothetical Reduced Cost (2009 prices) Savings Scenario Structure USD/ton % savings USD/ton Structure USD/ton International procurement and blending 20% 156.00 -20% (31.20) 17% 124.80 Port services and stevedores 18% 140.40 -5% (7.02) 19% 133.38 Credit for procurement 32% 249.60 - 35% 249.60 Domestic transportation 21% 163.80 -15% (24.57) 19% 139.23 Distribution/retail margins 7% 54.60 - 8% 54.60 Other (clearing charges, etc) 2% 15.60 -5% (0.78) 2% 14.82 Total 100% 780.00 (63.57) 100% 716.43 Total reduction as % base price = 8.2% Source: Own calculations based cost structure reported by Fuentes, et. al, 2011. Next, Table 3 presents a set of financial indicators medium- and high-input farmers than under base for medium and high-input hybrid maize using the conditions respectively. For medium-input farmers, base price of fertilizer and hypothetical 8.2% the savings on trade costs translates to USD reduction modeled above. For this analysis, 12.08/ha higher profits while for high-input farmers production costs and returns are based on Ministry the savings on fertilizer results in USD 24.16/ha of Food and Agriculture crop budgets a farmgate extra profit. In Scenario 2, it is assumed that the price for maize of USD 160/ton (GHS 30/kg). lower price of fertilizer leads to 10% more use per Unless indicated, all values are expressed in USD hectare and 15% higher yields. Under these per hectare. conditions, per hectare profits would be USD 52.88 higher at the medium-input level and USD 108.16 As demonstrated, Ghana could derive significant greater at the high-input level. For medium-input benefit from effort to improve trade conditions for farmers, this change is equivalent to transforming fertilizer. In the first place, Scenario 1 shows how maize from a loss-making activity into a profit an 8.2% reduction in fertilizer costs would result in making one in net terms. As a percent change, the 44% and 17% higher gross and net profits for 5| www.worldbank.org/afr/trade Table 3: Financial Indicators for Ghana Hybrid Maize (USD/ha) Medium input High input Fertilizer use (bags basal x top dress per ha) 2x2 4x4 Base conditions Crop yield (tons/ha) 1.70 3.50 Total revenue 272.00 560.00 Variable costs 244.48 421.93 Family labor & depreciation 47.34 56.38 Gross margin (total revenue - variable costs) 27.52 138.07 Net profit (gross margin - family labor & depreciation) (19.82) 81.69 Scenario 1 - Streamlined trade procedures (8.2% savings on fertilizer) Crop yield (tons/ha) 1.70 3.50 Total revenue 272.00 560.00 Variable costs 232.40 397.78 Family labor & depreciation 47.34 56.38 Gross margin (total revenue - variable costs) 39.60 162.22 Net profit (gross margin - family labor & depreciation) (7.74) 105.84 Scenario 2 - 8.2% savings on fertilizer, 10% more use, 15% more yield Crop yield (tons/ha) 1.96 4.03 Total revenue 312.80 644.00 Variable costs 232.40 397.78 Family labor & depreciation 47.34 56.38 Gross margin (total revenue - variable costs) 80.40 246.22 Net profit (gross margin - family labor & depreciation) 33.06 189.84 Farmgate price = USD 130/ton (GHS 30/kg). Scenario 2 increment is equal to a 134% increase in income for medium-input farmers and 64% guarantee that incremental profits will flow all the increase for high-input farmers. way up the chain to farmers, Scenario 1 shows how an 8.2% reduction in fertilizer costs would result in Finally, Table 4 looks at the total available profits more than five times as much total profit being for regionally traded maize from a value chain available per ton of exportable grain at the medium- perspective including the costs of primary assembly input level. With high-input management, total (transportation from the farm to a nearby collection profits per ton of export grain would be around point, a short period of storage, handling, and 31% higher. In Scenario 2, the total available profits preparation of essential export documentation). For per ton of exportable maize would be around this part of the analysis, total accumulated costs at thirteen times higher with medium-input the assembly point exclude profits paid to farmers management and 76% greater with high-input and local traders. This approach allows total management. Similar results would apply to maize accumulated costs to be subtracted from the export grown as an import substitute and the analysis parity price to show how much total profit is overall clearly shows that modest improvements in available to flow upstream to farmers and other trade conditions for fertilizer could have significant value chain participants. Unless indicated, all values tangible benefits for farmer incomes and regional for this part of the analysis are expressed in USD trade competitiveness. per ton of tradable grain. Again, the data demonstrate that Ghana could realize significant benefits from efforts to streamline trade procedures for fertilizer. Although there is no 6| www.worldbank.org/afr/trade Table 4: Value Chain Indicators for Ghana Hybrid Maize (USD/ton tradable grain) Medium input High input Fertilizer use (bags basal x top dress per ha) 2x2 4x4 Base conditions Crop yield (tons/ha) 1.70 3.50 Farm costs 171.66 136.66 Assembly costs (incl. documentation and storage) 62.55 62.55 Total value chain costs for export ready grain 234.21 199.21 Total available profit at export parity 2.79 37.79 Scenario 1 - Streamlined trade procedures (8.2% savings on fertilizer) Crop yield (tons/ha) 1.70 3.50 Farm costs 164.55 129.76 Assembly costs (incl. documentation and storage) 62.55 62.55 Total value chain costs for export ready grain 227.11 192.31 Total available profit at export parity 14.89 49.69 Scenario 2 - 8.2% savings on fertilizer, 10% more use, 15% more yield Crop yield (tons/ha) 1.96 4.03 Farm costs 143.09 112.83 Assembly costs (incl. documentation and storage) 62.55 62.55 Total value chain costs for export ready grain 205.64 175.39 Total available profit at export parity 36.36 66.61 Export parity = USD 358/ton cif Ouagadougou less USD121/ton for transport and road fees. For Scenarios 1 & 2, assume USD 5/ton less road fees from improved trade environment. Opportunities to Improve Trade Conditions There needs to be better awareness and adherence to trade rules. Presently, there is a lot of confusion Bearing in mind regional agriculture trade is in West Africa over the requirements to move food constrained by a great many things it is worth staples from one country to another. Very often, reviewing some of the areas where clear-cut policy border officials and even trade advisors do not improvements or other institutional change could know the correct procedures and will quote help West Africa realize the type of benefits different rules depending on who is on duty. The described above. There is a considerable body of use of certificates of origin to achieve duty free literature describing different trade constraints and status under the ETLS appears to be a particular large gaps that frequently exist between stated area of confusion. Truckers complain that officials policies and actual trade practice in West Africa. at the same border post sometimes request for a This brief note cannot possibly provide an certificate of origin for community-originating exhaustive account of all that needs to be done, or cereals when at other times they do not. This type even what could be done, to improve the regional of inconsistency not only leads to unnecessary costs trade of food staples and crop inputs. Instead, the and opportunities for corruption, but also makes aim is to highlight key areas of strategic importance trade risky for large and small-scale operators since where governments and other regional stakeholders it is difficult to know what documents will be could reasonably expect to reduce trade costs and required on any given day of the week. create a more reliable environment over the next few years to the benefit of farmers and small- and To help improve awareness, the USAID large-scale traders alike. Agribusiness and Regional Trade Promotion (ATP) project produced a wallet-size card listing the 7| www.worldbank.org/afr/trade requirements for regional food trade that it Box 1: Regional Trade Requirements distributes to traders (see Box 1). ECOWAS Rules for Documents for Trading in In a similar initiative, the regional NGO, Staple Foods Trade Staple Foods Borderless (which was set up and funded in part by Customs duties – NO ECOWAS Brown Card the ATP project) publishes its own pamphlets that VAT or sales tax – NO (insurance) – YES list the requirements for importing products to Statistical tax – NO Export declaration – YES Ghana at Aflao. Many of the documents listed by Computerization fee – Phytosanitary Certificate NO – YES ATP, however, are not listed by Borderless and Freight forwarder fee Waybill – YES vice versa. Borderless, for example, does not – YES Natl. and intl. driver’s mention the need for a phytosanitary certificate and Transit fee – NO license – YES instead says that all agriculture products must be ISRT logbook – NO Certificate of Origin – NO certified by the Ghana Customs and Excise and Weighbridge fee – YES ISRT logbook – NO (and Preventative Services (CEPS) Laboratory or Ghana Official road tolls – NO transit fee) Standards Authority (GSA). Traders in turn YES describe the CEPS/GSA inspection as being about phytosanitary control and say that officers will carry Source: USAID ATP out a visual inspection to look for pests even when Project they have the required phytosanitary certificate other users for a copy of each product specification. from Togo. GSA directors say this is the usual practice of standards bodies all around the world, but (apart While both the Borderless and ATP initiatives are from the lost revenue) could easily make pdf copies important steps in the right direction, there available on their website that would go a long way evidently needs to be greater coordination to to building a constituency for standards and, ensure that information given to traders is complete ultimately, to improving regional trade conditions, and accurate. In the above example, GSA standards product quality, and competitiveness. covering quality attributes such broken or shriveled grains and total defect are a completely different Governments need better commitment to free matter from phytosanitary standards concerned trade. Beyond the problem of confusion for with human, animal, and plant disease. The mixing everyday trade rules, there is a larger issue of of these aspects by GSA and CEPS officials no governments themselves not always being doubt contributes to the opaque trade environment committed to free trade. Many countries in West and is a specific area where trade facilitation Africa, notably Burkina Faso and Mali, often projects like Borderless and ATP could help implement seasonal export bans on cereals. As of improve transparency and understanding. late 2012, for example, Burkina was reported to have export bans on both rice and beans. Likewise, Dissemination of product standards by official in Ghana, the WFP reported that it had been agencies is another area where much could be done waiting since the end of August for a permit to to make trade conditions more transparent. Putting export 10,000 tons of maize to Niger without a aside the danger of making quality standards reply from government. In another example of mandatory (particularly if modeled on developed how governments have departed from regional country norms), voluntary standards can be used as trade agreements, Benin was until recently charging a language between traders and benchmark for transit duty on all goods that pass through its determining value. Nevertheless, the GSA and borders even though this is specifically not allowed other national standards bodies do not make their by the ETLS. work public and insist on charging traders and 8| www.worldbank.org/afr/trade Addressing the problem of limited will to Box 2: Costs of Regional Trade on the Ghana to Nigeria Corridor implement regional free trade agreements is likely to be one of the more intractable trade constraints. In a survey by the USAID Trade Hub, truckers on the Even though trade bans are seldom successful in Ghana to Nigeria Corridor said they have been asked to pay the following formal and informal achieving their objectives and have been shown to charges to transport food products. have many negative effects including increased food 1. Administrative Tax (1% fob) price volatility, many governments continue to 2. Association of Customs Agents Levy implement these polices in the name of food 3. BIVAC security and other political objectives. 4. Certificat d’origine 5. Certificatd’origine douane As such, the best that may realistically be expected 6. Certificat sanitaire (phytosanitary/SPS) in the near term could be to help traders cope 7. CNCB better with the risk of bans. Often trade bans are 8. Commune poorly communicated meaning that traders and 9. Convoy Fee/Escorte 10. Custom Agent even border officials do not know what the real 11. Declaration/quittance situation is and an obvious first step would be to 12. Ecor improve communication of when bans are put in 13. Ecotax place and when they are lifted. A second area for 14. ECOWAS tax improvement would be to make implementation of 15. Enregistrement 16. Entry Tax trade bans more predictable. This may be difficult 17. Finance Charge for Reimbursables to achieve, but efforts to define a set of verifiable 18. Gendarmerie Levy conditions under which governments could exercise 19. Hygiene & Sanitation their discretion to implement a trade ban could be 20. Import Card a good area for dialogue, especially if systems were 21. Laisser Passer geared to provide an early warning of when a ban 22. NAFDAC 23. Parking/Stationnement may be put in place. 24. Passage BMA 25. Passage magasin douane On a day-to-day basis, there also needs to be better 26. PC commitment to free trade by frontline border 27. Police Levy officials, police officers, and other control agents. 28. Priseen charge Mercantilist attitudes that see the only good kind of 29. Redevance informatique trade is export trade still hold sway across Africa 30. Section visite 31. Sortie and efforts to build awareness of the importance of 32. Standards Organization of Nigeria free trade could help avoid shipments being held 33. Statistical Tax up on spurious grounds. Petty and not-so-petty 34. Taxes de déclaration corruption not only adds to the cost of regional 35. Taxes globales trade but can also render improved trade rules 36. Taxes Supplémentaire meaningless if the procedures are not 37. Tolls/Péage 38. Transit Fee implemented. At Aflao, small traders say it 39. Veterinarian Tax common practice to pay GHS 4.00 to 5.00 per bag 40. Visa (about USD 21.30 to 26.60 per ton) to use the back Source: West Africa Trade Hub, 2012, p. 24. channel to avoid inspection and paperwork requirements. In another example, clearing agents GSA Officers for their inspections to “go fast�. in Tema say standard procedure is to pay GHS 100 Although each cost may seem minor and better to 200 (USD 53 to 106) per container to CEPS and than being delayed, these charges add up and have 9| www.worldbank.org/afr/trade a significant impact on competitiveness and permit based on a common list of pest risks would profitability. therefore be a good approach for ECOWAS. Other regional economic communities in Africa As a strategy for reducing illegal costs, Borderless including the EAC, COMESA, and SADC, have has been publishing quarterly reports on the each begun to harmonize their SPS rules using number of controls, cost of bribes, and delays along different approaches and offer useful experience on 13 major trade corridors since 2007. Borderless what works, what doesn’t work, and what should be says this strategy of naming and shaming has helped avoided. COMESA, for example, is in the process reduce costs over time, but acknowledges that of developing a “green pass� system for regional much more needs to be done to change attitudes SPS certification and ECOWAS may do well to and make formal rules more transparent and easy look at this approach. to navigate. In one of its recent reports, the USAID West Africa Trade Hub lists all of the charges truckers reported paying on the Ghana to Nigeria Box 3: Poor Utilization of Trucks corridor and more systematic monitoring of these Truck operators only make money when wheels are fees (including duplicate fees paid at borders) could turning. The average monthly distances covered by be a useful way to build on the name and shame transporters in different parts of Africa are shown strategy (see Box 2). below:  11,000 – 12,000km per month for domestic Develop clear rules that are easy to meet every day. transport within South Africa One very practical area where much can be done to  8,000 – 9,000km per month for international make regional trade rules easier to follow is to transport within Southern Africa (e.g. South adopt harmonized rules and regulations. One Africa to Zambia via Zimbabwe or Botswana)  5,500km per month in Eastern Africa notable barrier in agriculture is that ECOWAS  2,500km per month (at best) for transport does not have a regional agreement on sanitary and between Ghana and Mali or Niger phytosanitary (SPS) standards. As a result, traders Source: Bromley, et. al. (2011). are often required to pay for more than one SPS certificate and/or obtain multiple inspection stamps. UEMOA adopted a Framework SPS Agreement in 2007 and a pressing challenge now for ECOWAS Another important lesson is to avoid making is to adopt its own harmonized regulations. regulations that cannot be easily implemented. This Given the historic trade ties that exist between West point may seem obvious enough, but is a particular African countries and fact large amounts of food concern in West Africa where institutional capacity presently go around the formal system without any is often very weak. Other than SPS, for example, inspection at all, a regional approach based on one trade constraint that donors often point to is equivalence and mutual recognition of each other’s the lack of harmonized quality standards. While SPS systems would likely be more meaningful than quality standards are important for ensuring any attempt to harmonize with developed country product safety and can be useful in determining norms. Although the WTO SPS Agreement value, recent experience in EAC shows there is a encourages Member States to harmonize their SPS significant risk of introducing mandatory standards with international ones, it stops short of requirements modeled on advanced country making this a mandatory requirement. Simply put, conditions that are difficult for local farmers and African countries have very different SPS problems traders to meet or that consumers do not want and than developed countries do and only limited cannot afford. In the worst of conditions, these capacity to tackle their SPS problems. Efforts to standards not only add unnecessarily to cost, but develop a simple system for issuing a regional SPS can even become a trade barrier and new vector for 10| www.worldbank.org/afr/trade corruption. Like the EAC, the Ghana Standards environment. High transit costs including escort Authority has modeled most of its food standards requirements and the need to pay (and reclaim) on the International Codex Alimentarius, but now multiple customs bonds and have been a particular says it is revising its standards for maize to allow problem and should not even apply to staple foods higher tolerance for total grain defect in line with or other products with duty free status. Another local realities. Unlike the EAC, there have not yet area for improvement is the regional insurance been any serious attempts to develop harmonized system whereby truckers are required to obtain an regional standards by ECOWAS or UEMOA ECOWAS Brown Card to be covered outside their countries. home country, but say it is nearly impossible to make a claim when they need to. Continue the fight to reduce transport costs. A final important problem for agriculture trade that cannot Conclusions be overlooked is the high cost of transportation. Compared with manufactured goods and high-value This note sought to provide a concise overview of cash crops, food staples usually have a low value to current trading conditions for food staples and crop weight ratio so are particularly vulnerable to any inputs in West Africa and to highlight tangible inefficiency in the transport sector. While much opportunities for improvement. The example of can still be done to improve road infrastructure in reduced trade costs for fertilizer helped to illustrate West Africa, physical limitations are increasingly that trade facilitation is not just an esoteric pursuit viewed as less important than policy. In an but can have very significant, real life implications exhaustive study of the regional transport sector, for for poverty reduction and food security. To the example, Bromley, et. al. (2011) show how a host extent that savings on imported fertilizer can of factors ranging from the outdated truck queuing substitute for spending on subsidy programs, trade system to excessive regulations of vehicle operators, facilitation can also have an important impact on corruption at multiple checkpoints, and poor agriculture budgets and ability of governments to condition of vehicles contributes to West Africa deliver extension advice and other core services having some of the highest transport costs in the needed for agriculture growth. world (see Box 3). While there are a number of simple steps Roadblocks and control points are a particular governments can take, improving the regional trade problem. In its 20th Road Governance Report, environment will require a long-term commitment Borderless reported that truckers paid an average and strong political will. Just as the costs of of USD 4.40 in bribes, encountered 1.8 corruption and extraneous procedures are obvious, checkpoints, and suffered 16 minutes of delays for so too are there vested interests in the status quo every 100km travelled in the second quarter of and rents these systems generate. It is therefore 2012. Some countries, of course, did worse with important for West African leaders and agriculture Mali recording USD 10.40 in bribes and 22 stakeholders more generally to stay focused on the checkpoints per 100km, against USD 1.42 in bribes ultimate objective of free trade and social benefits and 10 checkpoints in Togo. In Ghana, traders improved trade systems can bring. encountered 20 checkpoints and paid USD 1.47 in In this regard, a useful strategy for each country bribes per 100km. would be to define a set of actions to achieve its While initiatives such as regular Road Governance trade goals in coordination with regional partners Reports have done much to raise awareness of the around which the international community could impact of unofficial charges and led to the organize appropriate support. Given the practical elimination of some checkpoints, much more challenges of policy reform, part of the process needs to be done to improve the transport policy should involve defining clear outcomes/indicators 11| www.worldbank.org/afr/trade for each action item. These can be used to monitor made in West Africa to build awareness for the progress and to hold officials and leaders high costs of roadblocks and control procedures, accountable to commitments they make to deliver complementary efforts to increase awareness for open regional markets for food staples. Concrete the benefits of free trade are also important for actions to build a constituency for free trade will Africa to realize its potential to feed itself. also be important. While good progress has been 12| www.worldbank.org/afr/trade About the Author John Keyser is an independent consultant based in Lusaka, Zambia. This work is funded by the Multi-Donor Trust Fund for Trade and Development supported by the governments of the United Kingdom, Finland, Sweden and Norway. The views expressed in this paper reflect solely those of the authors and not necessarily the views of the funders, the World Bank Group or its Executive Directors. References Aidoo, Francis (2012). Ghana and Togo Cross-border Trade Experience, background document submitted to The World Bank, Poverty Reduction and Economic Management (December 2012), Accra. Borderless (2012). 20th Road Governance Report: Results of Surveys during the Second Quarter of 2012, Borderless WA, Accra. Brock, Lori; Omoluabi, Ometere; and Van Dusen, Nate (2010). Ghana Gap Analysis: ECOWAS Free Trade Area, West Africa Trade Hub Technical Report No. 36 (December 2010), USAID West Africa Trade Hub, Accra. Bromley, Daniel; Cook, Andrew; Sing, Savitri; and Van Dusen, Nathan (2011). Regional Agricultural Transport and Trade Policy Study, West Africa Trade Hub Technical Report No. 41 (March 2011), West Africa Trade Hub, Accra. Bumb, Balu L; Johnson, Michael E; Fuentes, Porfirio A (2011). Policy Options for Improving Regional Fertilizer Markets in West Africa, IFPRI Discussion Paper, 01084, International Food Policy Research Institute (IFPRI), Development Strategy Governance Division, Washington DC. FAO (2008). Harmonized Seed Legislation in West Africa, information pamphlet on ECOWAS Harmonized Seed Legislation, Food and Agriculture Organization (FAO), Plant Production and Protection Division, Rome. Fuentes, P.A.; Johnson, M.; and Bumb, B. (2011). Improving Fertilizer Markets in West Africa: The Fertilizer Supply Chain in Ghana, Draft for Review, International Fertilizer Development Center (IFDC), and International Food Policy Research Institute (IFPRI), Washington DC. Ghana News Agency (2012). Farmers Lose 75 percent Fertilizer Allocation to Smuggling, 6 September 2012, Accra. Republic of Ghana (2010). Plants and Fertilizer Act, 2010 (Act 803), Government Printer, Assembly Press, Accra. West Africa Trade Hub (2012). Impact of Expedited Trade on Private Sector Investment in ECOWAS, West Africa Trade Hub Report (February 2012), USAID West Africa Trade Hub, Accra. World Bank (2012). Africa Can Help Feed Africa: Removing Barriers to Regional Trade in Food Staples, Poverty Reduction and Economic Management (PREM), Africa Region, The World Bank, Washington DC. 13| www.worldbank.org/afr/trade